Fiano v. Premier Capital, LLC (In re Fiano)

• Decision Date: 25 September 2019
• Docket Number: Case No.: 15-21410 (AMN)
• Court: U.S. Bankruptcy Court — District of Connecticut
• Parties: In re: PAUL FIANO, SR., Debtor PAUL FIANO, SR., Movant v. PREMIER CAPITAL, LLC, ROBERT AND HELEN WOLVERTON, THOMAS AND TAMMY SOUSA, JR., AND FORD MOTOR CREDIT, CO. Respondents

In re: PAUL FIANO, SR., Debtor

PAUL FIANO, SR., Movant
v.
PREMIER CAPITAL, LLC, ROBERT AND HELEN WOLVERTON,
THOMAS AND TAMMY SOUSA, JR., AND FORD MOTOR CREDIT, CO. Respondents

Case No.: 15-21410 (AMN)

UNITED STATES BANKRUPTCY COURT DISTRICT OF CONNECTICUT NEW HAVEN DIVISION

September 25, 2019

Chapter 7

Re: ECF No. 65

MEMORANDUM OF DECISION AND ORDER AFTER EVIDENTIARY HEARING CALCULATING THE AVOIDANCE OF LIENS PURSUANT TO 11 U.S.C. § 522(f)

APPEARANCES

Anthony S. Novak, Esq.
Novak Law Office, P.C.
280 Adams Street
Manchester, CT 06042

Counsel for the Movant

Zachary J. Gregoricus, Esq.
Curran Antonelli, LLP
22 Boston Wharf Road, 7th Floor
Boston, MA 02210

Counsel for the Premier Capital, LLC

Before the Court is the debtor, Paul Fiano, Sr.'s ("Fiano"), motion seeking to avoid judicial liens on his one-half interest ("Fiano's Interest") in commercial property known as 548-552 Middle Turnpike East, Manchester, Connecticut (the "Property") pursuant to 11 U.S.C. § 522(f) (the "Motion to Avoid Liens"). ECF No. 65. Premier Capital, LLC ("Premier") objected challenging the validity and extent of the senior encumbrances on

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the Property.¹ ECF No. 67. After an evidentiary hearing, I conclude Fiano failed to meet his burden to prove the existence of real estate taxes owed on the petition date, the validity of a mortgage to Rocco Fiano, the extent of the water and sewer liens, and the interest to be charged on a lien in favor of Robert and Helen Wolverton. Applying the calculation required under § 522(f), Premier's Lien is partially avoided and reduced to $58,001.70 against Fiano's Interest in 548-552 Middle Turnpike East, Manchester, Connecticut. The subsequent liens of Thomas J. and Tammy Sousa and Ford Motor Credit Company are avoided in their entirety.

I. JURISDICTION

The United States District Court for the District of Connecticut has jurisdiction over this case by virtue of 28 U.S.C. § 1334(b). This Court derives its authority to hear and determine this matter on reference from the District Court for the District of Connecticut pursuant to 28 U.S.C. §§ 157(a), (b)(1), and the District Court's General Order of Reference dated September 21, 1984. This is a "core proceeding" pursuant to 28 U.S.C. §§ 157(b)(2)(A), (K), and (O). This memorandum constitutes the Court's findings of fact and conclusions of law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure, applicable in this proceeding pursuant to Rules 7052 and 9014(c) of the Federal Rules of Bankruptcy Procedure.

II. PROCEDURAL HISTORY

On August 7, 2015, Fiano filed a voluntary Chapter 7 bankruptcy petition (the "Petition Date"). ECF No. 1. On Schedule A (Real Property), Fiano disclosed a one-half

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interest in the Property and estimated the Property had a fair market value totaling $188,600.00 on the Petition Date. ECF No. 8. Fiano claimed an exemption in the amount of $2,500.00 in the Property pursuant to 11 U.S.C. § 522(d)(5).² ECF No. 38, Schedule C - Property Claimed as Exempt.

On June 8, 2017, Fiano filed the Motion to Avoid Liens seeking to avoid several judicial liens pursuant to 11 U.S.C. § 522(f). ECF No. 65. In the Motion to Avoid Liens, Fiano asserted the Property had a fair market value of $ 178,500.00³ as of the Petition Date and was encumbered by the following liens:

Creditor	Amount; Asserted in; the Motion	Liens Against	Record Date
Manchester Water and; Sewer Department	$14,363.804	Entire Property	2/1/2006, 2/6/2009,; 3/15/2010, 2/23/2011,; 3/12/2012, 5/14/2013
Mortgage to Manchester; State Bank; later assigned; to Rocco Fiano; ("Manchester Mortgage")	$45,549.00	Fiano's; Interest	1/6/1986
Darcey Kitchens and; Millwork Inc. ("Darcey; Attachment")	$50,000.00	Fiano's; Interest	6/1/1999
Robert Wolverton and; Helen Wolverton; ("Wolverton Lien")	$21,841.54	Fiano's; Interest	2/18/2000
Premier Capital, LLC; ("Premier Lien")	$247,282.91	Fiano's; Interest	1/24/2001
Thomas J. Sousa Jr. and; Tammy Sousa	$153,589.90	Fiano's; Interest	11/26/2011
Ford Motor Credit; Company	$ 7,423.72	Fiano's; Interest	5/5/2014

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Premier objected arguing the Manchester Mortgage was invalid and disputing the amounts of the other liens against the Property. Prior to the evidentiary hearing, Fiano conceded the Darcey Attachment was dissolved by operation of law because a judgment never entered. ECF No. 133 at 00:19:12 - 00:19:33; ECF No. 141 at 00:32:20 - 00:32:31.⁵ Thus, the Court excludes the Darcey Attachment from the § 522(f) calculation.

On April 29, 2019, the Court held an evidentiary hearing.⁶ Fiano was the sole witness.

III. FINDINGS OF FACT

In accordance with Fed.R.Civ.P. 52 and Fed.R.Bankr.P. 7052, after an evidentiary hearing and consideration of the record, the Court makes the following findings of facts.

1. The Property consists of a mixed-use building comprised of four (4) 1-bedroom apartments and a ground level restaurant located at 548-552 Middle Turnpike East, Manchester, Connecticut. ECF No. 141 at 00:39:28 - 00:40:00.

2. On the Petition Date, Fiano owned a one-half interest in the Property, with the other one-half interest being held by his brother, Rocco Fiano. ECF No. 126 - Joint Statement of Undisputed Facts, ¶ 3.

3. After the Petition Date and the filing of the Motion to Avoid Liens - in December of 2017 -- Rocco Fiano passed away. ECF No. 141 at 00:07:36 - 00:07:45; 00:52:59 - 00:53:09.

4. During the hearing, Fiano provided slightly varied valuations for the Property. On direct examination, Fiano testified the Property had a value of $180,000.00 on the

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Petition Date. He based this figure upon his knowledge as an owner,⁷ his experience as a licensed real estate broker,⁸ and his review of Manchester's tax assessment records. ECF No. 141 at 00:10:35 - 00:10:45; 00:36:38 - 00:37:27; 00:38:30 - 00:39:00. On cross examination, Fiano acknowledged that he listed the Property's value at a higher amount of $188,600.00 in Schedule A. ECF No. 141 at 01:05:55 - 01:06:36. Fiano found the discrepancy in the value unremarkable noting that he -- as a licensed real estate broker -- considers even a five (5%) percent disparity within the range of reasonableness. ECF No. 141 at 01:11:47 - 01:12:30; 01:19:44 - 01:21:06.

5. Fiano also introduced an appraisal conducted by Robert R. Morra and Frederick L. Speno of Morra Associates providing a valuation $178,500.00 as of November 28, 2016.⁹ Ex. 102. This appraisal was conducted over a year after the Petition Date and the Court affords it little evidentiary weight.¹⁰ However, the Court credits Fiano's testimony regarding the condition and age of the building and his experience as an owner and real estate broker and finds that the Property had a fair market value of $180,000.00 on the Petition Date. Premier offered no evidence to refute Fiano's testimony as to the age, condition, or value of the Property.

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6. Fiano claimed a $2,500.00 exemption in Fiano's Interest in the Property pursuant to 11 U.S.C. § 522(d)(5). ECF No. 141 at 01:11:24 - 01:11:40; see also, ECF No. 38 - Amended Schedule C - Property Claimed as Exempt. No objection was filed to Fiano's claim of exemptions and the $2,500.00 exemption in Fiano's Interest in the Property is allowed by operation of law. 11 U.S.C. § 522(l).

7. During the evidentiary hearing, Fiano - for the first time - claimed that $5,000.00 was owed to the Town of Manchester for real estate taxes as of the Petition Date. ECF No. 141 at 00:22:57 - 00:23:14; 00:24:10 - 00:24:14.

8. Fiano testified that he believed Manchester was owed $15,961.54 for water and sewer liens on the Petition Date. ECF No. 141 at 00:24:16 - 00:24:25; see also, ECF No. 131, 124. Fiano asks the Court to credit his testimony that the $15,961.54 figure reported on the Past Due Notice dated November 30, 2016 was the same amount due over a year earlier on the Petition Date. Ex. 103; ECF No. 141 at 00:28:16 - 00:28:28. However, the Past Due Notice is unclear as to the time period it covers and whether it includes post-petition charges. Ex. 103.

The Court is unpersuaded that the $15,961.54 is an accurate figure as of the Petition Date. Accordingly, the Court relies upon - and will use for purposes of § 522(f) - the amount of $15,313.52 as calculated from the water and sewer liens, Exs. 104 - 109, and as set forth in the following chart:

Exhibit	Amount Due	For:	Volume & Page
Ex. 104	$2,801.79	Water & Sewer for quarter; ending 11/2005	Vol. 3222, P. 106
Ex. 105	$2,085.62	Water & Sewer for quarter; ending 11/2008	Vol. 3634, P. 110
Ex. 106	$2,452.20	Water & Sewer for quarter; ending 2/2010	Vol. 3745, P. 205

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Ex. 107	$2,889.49	Water & Sewer for quarter; ending 2/2011	Vol. 3843, P. 326
Ex. 108	$2,614.58	Water & Sewer for quarter; ending 2/2012	Vol. 3937, P. 205
Ex. 109	$2,469.84	Water & Sewer for quarter; ending 2/2013	Vol. 4069, P. 188
TOTAL	$15,313.52

The Court does not credit or find reliable Fiano's testimony elicited by Premier regarding possible lease payments made by a tenant at the Property directly to the town of Manchester that may have reduced the balance owed. Again, the Court notes the balance owed on the Petition Date for water and sewer liens was information easily obtainable by either party from the municipal water and sewer authority.

9. Fiano testified that around the time of the Property's acquisition, Fiano and his brother, Rocco Fiano, granted a mortgage to Manchester State Bank ("Manchester Mortgage"). ECF No. 141 at 00:11:50 - 00:12:15; Ex. 110. The Manchester Mortgage is dated January 3, 1986 and recorded in volume 996, page 2 of the Manchester land records. Ex. 110. Attached to the Manchester Mortgage is a variable rate note with an original principal balance of $140,000.00, initial interest rate of 12.00% per annum, and a maturity date of January 3, 2001. Ex. 110.

10.Approximately two years before the maturity date of the note, on January 27, 1999, Manchester State Bank assigned the

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